alevin's account talk

[alevin]

thanks Steady.

Another little something I was contemplating recently, hadn't gotten around to posting yet. Basically, it edicated me about P/E ratios and how they differ between cyclical bears and secular bears. I've been waiting for 7x P/Es, but didn't realize you only get those at bottom of secular bears, which don't come til nearly the end of the secular cycle. the one we're in is only about halfway through, which fits other prognoses I've seen that things will really really tank about the time I'm due to retire around 2019 or so. Per this article we're in a cyclical bear within the secular bear. If this is the cyclical, what's the secular going to be like?

Realize that today’s bearish arguments stating that 7x earnings wasn’t hit in March, so therefore today’s stock markets can’t be in a new bull, are totally specious. Anyone advancing this 7x thesis does not understand stock bears and has not studied them. Major and very profitable cyclical bulls can erupt within secular bears from all kinds of valuation levels. 7x earnings are not seen until the very end of a secular bear!

If you carefully study this chart, it utterly shatters the popular notion among traders today that a stock bear can’t end until we see 7x earnings. While a secular bear won’t end until such low valuations are seen, cyclical bears can end regardless of where valuations happen to be because valuations are not what drive these cyclical moves within secular trends.

​

In the last secular bear that ended in 1982, general stock valuations did indeed fall under a P/E ratio of 7x earnings. But it didn’t happen until 17 years in! In October 1966, the SPX bottomed at 18.8x earnings and then rallied 48% by November 1968. In May 1970 the SPX bottomed again at 13.8x earnings, still way above the 7x metric. Yet out of those “overvalued” lows a strong 74% cyclical bull emerged that ran until January 1973. And this pattern goes on and on if you follow the red line above.

The key point is that cyclical-bear bottoms within secular bears don’t require any certain P/E-ratio level. That is a misleading myth propagated by sloppy analysts too lazy to actually study market history. Cyclical bears bottom when stocks get too oversold near the bottom of their secular-bear trading range, it has nothing to do with valuations. The best example of this ironclad truth is from our current secular bear

[which started in 2000-per this article-as well as others I've been reading].
http://www.zealllc.com/2009/bearcyc.htm

 

[Steadygain]

Alevie,
Every night I sleep very hard for several hours and then go for hours in a semi-sleep state, aware of all the reflections my brain is processing; yet somehow remaining in a state of sleep.

I'm sharing this because as I reflect over all the activities (one by one) my brain immediately associates each one with other information. When the post about us playing 'Warewolves of London' popped up then the information about the tendons in your fingers and the need for surgery was reflected with that and subsequently I felt really bad about making that post.

That song is one of my favorites - because it has such a 'good beat' and it's fun and the lyrics are amazing. Anyway, please let me know whenever you do go for surgery so I can be praying for miraculous results.

Steady

 

[alevin]

Steady, you're amazing for remembering little things. Thanks for thinking of this, comment didn't bother me at all re playing tho. I had to laugh tho, since I DO play rhythm-backup when I play with OT fiddler groups-(been awhile). I'll have to find a youtube production of werewolves, sounds like, not familiar to me. I DO like to howl tho, I'm known to do so when I get wound up in appropriate settings.:nuts:

As far as the surgery goes, the project I'm tied up in right now mandates full use of hands for intensive computer work (I have an ergonomic keyboard setup where I do mousework with both hands and all fingers, not just one finger-saves the work on the index fingers which were in horrific condition a couple years back prior to ergo equip purchase-index fingers still give me minor grief even now once in awhile). I'm having to defer surgery til project is done.

Right now its the extra work holding gardening tools or trying to hold a paperback book to read that is giving me grief with both ring fingers (I'm not doing much reading these days, in part due to strain of holding books open). Ring fingers were huge problems last year from overuse from different activity, low-key at night right now but warning me not to do more than I'm doing at the moment or I'll really be in trouble I can't afford to be in right now for work reasons. Waiting til workload lightens up into September before trying to schedule surgery for 1 or more fingers. Will keep you posted.

 

[alevin]

So close, yet so far. Still waiting.

View attachment 6504

http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=3&mn=0&dy=0&id=p04959721347

Watch the green line, If it drops below the candle line, look out. The horizontal red line is a support line-for the time being. distance between top and bottom lines of cloud is range of resistance.

 

[alevin]

Happy 4th (or 5th), everybody. Still the 4th for me. Really cool fireworks tonight, they were backlit at their level by lightning along the ridge behind town. Happened several times during the show. Couple shooting stars joined the show as well. Very coool. All in all, a nice evening spent with friends.

 

[alevin]

http://certainruin.blogspot.com/

the 30 stocks in the Dow Jones Industrial average have an average PE ratio of about 13. It is about the same whether you use trailing earning or forward analyst estimates for next year. Well 13 is indeed pretty cheap compared to the long term average of about 15.

But looks can be deceiving. The question is what the earnings will be in the future.

The PE ratio fell quickly from about 20 in 1929 to about 13 by the beginning of 1930. People naturally expected a quick economic recovery and decided that stocks were cheap. The PE ratio jumped up to about 18 before the rally fell apart. The amazing thing is that the PE ratios never strayed far from 17 during the rest of the bear market except for right at the end when it fell quickly to bottom at 10. earnings fell steadily until they fell to about 7 from the peak at 26, a 73% decline. The story of the great bear market was really one of corporate earnings not valuation.

Corporate profits tend to revert to about 6% of GDP. ...If they bottom at half this average [3% of GDP] that would be just like in the Depression. If that happens we might expect the S&P to fall to at least a PE of 15. The S&P 500 earnings peaked about about 85 so a 75% decline [to 3% of GDP] would be 21 and a 15 PE would bring the index to a horrifying 315 a 65% decline from here.

In my piddly lil brokerage accounts (Roth and taxable), I'm focusing on fundamentals (including earnings) as well as charts. single stocks as well as sector ETFs. DecisionPoint Carl Swenlin estimates monster GAAP earnings drop in Q3 (relative to Q2), but small positive earnings by Q4. If the market looks out 6 months, then the Q3 earnings were already discounted as of March bottom? (do I have that right?). Swenlin's latest analysis says zilch about earnings developments going forward into Q1 from here.

2010.http://www.decisionpoint.com/TAC/SWENLIN.html

 

[alevin]

What Buster said.....Buster, if I could give brownie points today, you'd get 5. Other than that, still cogitating the market. Prognosis is for up then Down, or down, up, Down. Not sure what this week will bring, but more down is in the works at some point, still doing the risktaking in brokerage accounts for now (about 3% worth of TSP account).

Some more economic history for all the history buffs out there-economic policy implications for our possible future.
http://www.prudentbear.com/index.php/thebearslairview?art_id=10245

Quite a few points in the article caught my attention...

Robert Allen's new book, "The British Industrial Revolution in Global Perspective," is a major intellectual breakthrough. Allen, Oxford professor of economic history, has used long-term price data only now available though computer database technology to demonstrate definitively why the Industrial Revolution happened when and where it did. The causes? Imperialism, cheap coal and happy sheep. Max Weber's Protestant work ethic had nothing to do with it! Allen's conclusions have interesting implications for the global economic position today.

....The depopulation of the Black Death also caused wage rates to rise and, in England, reproductive patterns to change, producing a decline in fertility. England's lower fertility ensured that the impoverishing 16th and 17th centuries were less impoverishing than elsewhere in Europe and wages remained relatively high. One of Allen's more startling discoveries is that real wage rates in Vienna in 1825 were a quarter of their level 400 years earlier (1348 Black Death/Plague); in England, this immiseration did not happen. [He explains why in the article].

Cheap coal was not a resource unique to England; Belgium, the Ruhr and Poland had extensive coal deposits. Its availability in quantity for early industrialization was, however, due to the rapid growth of London, which generated a building industry large enough to experiment with chimney designs, thus producing houses that could be heated by coal as its cost advantage over wood grew. Once coal production for fuel was substantial, the mining districts in the Midlands and the Northeast had fuel costs far below those anywhere else in Europe, making highly inefficient experimental technologies such as the Newcomen steam engine commercially attractive .

Only Britain's island status, preventing it from being subjected to devastating war as in 17th century Germany, gave it a special ability to make the crucial first steps.

There are a number of modern policy lessons that can be learned from Allen's analysis.....

[I'll encourage you guys go to the article direct, there's a lot of meat in the article you'd miss by taking shortcuts-immigration, H1-Bs, sharing technology with other countries, low-skilled vs. high-skilled labor costs and wage rates, etc.], agriculture and rural development, Bird flu implications, etc.]

 

[Birchtree]

Didn't you and I have a conversation a while back regarding DLX which I believe was around $8.00 at the time. Today it's trading at $16.63 and I will buy more later today.

 

[alevin]

Sorry Birch, don't recall DLX conversation. ATN yes. I was looking at DLX several months ago among many others, I only have so much $ to buy the stinkers (those with actual non-artificial value and probable future) at this point, much unlike your 30-year accumulation. A whole wide brand-new universe to me. I move slowly and cautiously, learning as I go. Conserving a handful of investing/trading cash for that next big downturn to spend when prices are better. It will come, how can it not?

Working on cutting longterm home energy costs with hard savings cash flow this year while prices are still coming down. Better investment at the moment than stocks. Electrical upgrade/heating and cooling on deck currently, roofing and skylights next, then insulation, then fencing, then back porch concrete pad repair/upgrade. Funds diversification. Something for everyone.

 

[alevin]

Well, looks like the weekly candle signal from past 4 weeks has been confirmed as of today, per this week's followthrough candle. The ADX daily confirms, and my ultra-super topsecret formula for calculating the probable top of the run predicts we could hit 1042 and change before things turn over again for real.

Meantime, we're only on week 5 of a TD DeMark 13-week build up to sell signal, so it may take us a few weeks yet to peak out. Since we're so close numberswise (could top out in a day this market), think I'll just put a couple chips on C and I tomorrow, see what happens next. We're still not over any longterm humps on the weekly buy signals I'm waiting for. Does that surprise anyone? :suspicious:

 

[Steadygain]

Alevie,
Thanks for letting me be like a 'Big Bro' to you

That's cool - in fact that is very cool and it's something I take very serious and with great honor.

I worry about you and Lady - because you both have so much in common and the last thing you need is 'added stress' making those aches and pains even worse. I wish there was more I could do to help out.

Well I'm off - my friend - will keep ya in my thoughts and prayers

Steady

 

[alevin]

Steady, thanks for the stop-by and good thoughts. My aches and pains are not bad at the moment and are not like Lady's (I'm not a disability-retirement condition, unlike her). Was planning on going in for some small but expensive body repairwork this week tho (takes a day of s/l to get it done, plus 8 hours of road time and not covered by insurance even tho its the only treatment tried that's made measurable difference in that problem). Other things this week derailed that plan til late August. It can wait since it must. Don't be worrying about that. I'm not.

 

[alevin]

Sure looking forward to getting new roof and insulation. This past week of 100-106 temps with 87-89 degree rooms inside the house has sure been no picnic. thank the Lord for the small room ac in the den. Haven't spent much time on computer since computer room is 88 degrees as I speak, think I'm overworking the computer fan just by turning machine on, but supposed to cool down end of week to upper 80's, sure looking forward to that.

Just got some new house wiring done this week and repainting is finally finished, the checkbook as of today says I have enough cash to get reroofing done next, with skylights of some kind. Hope I can squeeze the insulation work in before winter. Before next summer, lord willing, I'll have heat pump installed to make the house more liveable NEXT summer. Later all, gonna go down and sit in the ac again for awhile. I need nnuuts avatar, it matches how people feel about the heat wave here. :nuts:

 

[alevin]

Oh boy, here we go, moving into overtime mode today, thanks to the heat wave. I'll have to bump up my TSP contribution %wise to offset the extra taxes, since OT doesn't count into FERS retirement or SS either one. Will be working OT hours around the edges the next few days. I'm part of the civilian "militia" around here when it comes to dealing with fires.

 

[XL-entLady]

Good luck with the heat wave and fire flighting, Allie!

We're 105 degrees today but people are used to that here. We just say, "But it's a dry heat," and roll our eyes. :cheesy:

Take care of yourself and stay hydrated!

Lady

 

[Birchtree]

Yesterday while surfing for lake property the temperature in Seneca, SC was 86 and in Cashiers, NC it was 71 - guess where I want to go.

 

[alevin]

Good luck with the heat wave and fire flighting, Allie!

We're 105 degrees today but people are used to that here. We just say, "But it's a dry heat," and roll our eyes. :cheesy:

Take care of yourself and stay hydrated!

Lady

agh, we get this every year. Saw a bank sign one year read 119. I'm just tired of putting up with it the past 11 years. time for a change now that I have cashflow to remedy. Getting energy audit tomorrow from local utility. Growing up in VA and working outdoors in 90+ and 80% humidity I could handle as teen and early 20s, until I ended up with heat exhaustion after a fine midday canoe trip on the Potomac in early 20s working as counselor in a girl scout camp. Didn't hit me til cool of the evening hours later, when I keeled over sideways suddenly.

I worked in the desert long days on foot with just a quart of water, days and weeks on end in mid20s, started doing 2-hour midpm siestas with working partner when we could find shade, since we were paid by the day and worked 12-14 hour days on average. Never bothered me except a couple times back then. Guess boomerdom is catchin' up with me. :toung:

 

[alevin]

almost to the end of my regular work day, OT starts in 45 minutes. Worked til 930 last night, anticipate til 8 tonight,first days of a fire are a bit chaotic getting things set up and organized.

Next week I start on a temp promotion for 2-4 months. Guess who's going to sock the overage into TSP to keep taxes down? Might even have some left over to put into Roth this year too, depending how soon they get fulltime replacement for the higher position I'm filling behind. My supervisor's been filling in laterally behind another vacancy, so us in her department have been getting to take turns bumping up for short spells to fill behind her, but she'll be back by fall to resume normal role.

 

[Steadygain]

Gosh.. reading over everything ... I hope you're doing OK.

Your attitude is fantastic

 

[alevin]

I'm a doin fine, Steady. The hand bothers chronically lowkey but not incapacitated. The elbow bothers when I work it a little more than normal, but not incapacitated (that's the rescheduled med trip end of month). The heat wave broke with a vengeance yesterday and today, rain rain go away! No not really! :cheesy:

Worked 3 nights total before they relaxed enough to let me go from working fire in evenings. 930, 9 and 830 pm, 12 extra hours total. Last night, being I didn't work fire, I got to work in garden a little as the misty dew/light drizzle started, very refreshing I tell ya, actually slept in my normal sleeping quarters last night, first time in weeks. Woke to serious drenching small-stream flood potential downpour, steady ongoing all day today.

Got energy audit done yesterday, got couple contractors scheduled to develop bids next week, minisplit heat pumps and insulation. Anticipate a few other contractors will be calling for site visit as well. Will spend the weekend finalizing my goals for skylights and solartubes, then will contact roofing outfits to submit bids on that (reroofing needs to happen before insulation guys can do their thing.). Now if the banks don't do a holiday on us this fall, I'll be fine! :blink::worried:

Oh! and since my technical indicator target 13x34 weekly ma finally closed over end of day today, I'm planning on courageously leaping further into the fray come Monday, but probably not all the way. Market is completely irrational, but as they say, can stay that way longer than.....My sticky pants will be worn with a quick-release tab, let me tell you.